China wants to set up a $40 billion state fund for semiconductor manufacturing

China is reportedly preparing to launch a new $40 billion government-backed investment fund to subsidize China semiconductor industry while the country tries to catch up with the US and other rivals in the race for supremacy in high-end chip production.

The approximately $40 billion investment is likely the largest of three investments by the China Integrated Circuit Industry Investment Fund, also known as the Big Fund, according to a Reuters report citing people familiar with the matter , launched. The fund’s target is larger than similar funds launched in 2014 and 2019 and will reportedly focus investments on equipment used to manufacture advanced chips.

Chinese President Xi Jinping has been pushing for China to achieve semiconductor self-sufficiency as the US and its allies have sought to restrict the country’s access to advanced chips over fears the Chinese government will use them to accelerate its military modernization and for could use further internal repression. The reported launch also serves as a counter-proposal to that of the US government bipartisan CHIPS lawwhich provided $39 billion in production subsidies to boost domestic production of high-end chips.

Commerce Secretary Gina Raimondo says US companies that complain about China will become “uninvestable.”

The US, Japan and the Netherlands have introduced a series of export controls in recent years aimed at preventing Chinese companies from acquiring the tooling needed to manufacture the most advanced types of semiconductors, such as those used in power supplies artificial intelligence Models or guidance of precision weapon systems.

These trade restrictions reportedly prompted Chinese telecom giant Huawei to receive $30 billion in government funding to set up a semiconductor manufacturing network of companies trading under different names that could potentially serve as a workaround for export controls.

READ ON THE FOX BUSINESS APP

Huawei Builds Secret Chip Network to Circumvent US Sanctions: Report

The story goes on

The Chinese government also responded by imposing its own restrictions like these The target is the US chip manufacturer Micron.

Export controls for China have prompted some companies in this space, such as AI powerhouse Nvidia, to overhaul their product offerings to ensure chips sold to China comply with export controls. Nvidia noted in a recent regulatory filing that the US has implemented similar controls unknown countries of the middle east. It is unclear which countries in the Middle East are subject to the restrictions, although some have close economic ties with opposing countries such as China and Russia.

NEW US TECHNOLOGY RESTRICTIONS AGAINST CHINA MAKE INVESTORS CAUTION AND WATCH FOR RETAILS

According to the Reuters report, it’s unclear when the Chinese government will launch the fund and the fundraising process could take months.

The Big Fund’s two predecessor funds were funded by state-owned companies such as China Development Bank Capital, China National Tobacco Corp. and China Telecom funded.

In the past, the Big Fund has also included China’s two largest chip foundries, Semiconductor Manufacturing International Corp., in addition to flash memory chip maker Yangtze Memory Technologies and several other smaller companies and funds. and Hua Hong Semiconductor.

Despite its past investments in the sector and its presence as a leading producer of less sophisticated chips, China has struggled to become a leader in the global advanced chip supply chain.

Reuters contributed to this report.

Original source of the article: The chip war is intensifying: China launches $40 billion sovereign wealth fund for semiconductor manufacturing